Without a doubt, this has been one of the most challenging years in recent times, with concerns about health and mortality taking centre stage globally. In times like these, topics like estate planning come to the fore. Creating a comprehensive estate plan that deals with your assets and provides for your loved ones after your death is an important financial duty in ordinary times. But now, more than ever, you owe it to yourself and your loved ones to take extra precautions in securing the distribution of your assets after your death.
The importance of estate planning: More than a Will
Creating an estate plan is an important responsibility for every adult, yet it is estimated that at least 70% of South Africans do not have a Will in place. Creating a Will that is legally valid is the only way to protect your loved ones after you are gone. The last thing you want to do is leave your loved ones grappling with the tragedy of your passing, but also with a bitter feud over the validity of your Will.
Bob Marley passed away without leaving a Will. An estate worth well over $100 million had to be wound up by a state executor that was not familiar to the family. Furthermore, the estate had to be divided according to the law and not according to the deceased’s wishes.
Planning your estate involves crafting the documents (like your Will) and the processes to be followed upon your death to ensure your loved ones are looked after. Estate planning is crucial if you are married, have been married several times or have children.
Many people mistakenly believe that estate planning simply involves making a Will. A Will however, is only one part of a comprehensive estate plan. Other issues like your marriage contract(s), capital gains tax and your income tax all need to be considered to ensure that the winding up of your estate is seamless.
Structuring your estate to reduce tax
What many people fail to realise is that tax plays an important role when it comes to inheritances. With astute estate planning, you can limit the impact of tax on your estate and ensure your loved ones inherit more. In 2016, the South African Revenue Service (SARS) introduced a directive that states that any person who dies with a net estate worth more than R3.5 million, will be charged at the rate of 20% by the government. Any applicable estate duty is payable to SARS within one year of the date of death, or 30 days from the date of assessment if the assessment is issued within one year of the date of death.
Your estate can be structured to limit tax implications, for example donations and gifts are treated differently to inheritances and if a once-off donation of R100 000 is made by an individual, no donations tax is payable.
There are also costs that can be deducted from the estate prior to calculating tax.
Protect your loved ones by planning today
To find out more about estate planning, including creating a legally valid Will and structuring your estate to reduce your tax, speak to our estate planning team today. We provide an all-inclusive service and will structure your estate to ensure that your loved ones are protected and benefit from your careful planning.